On Tuesday (November 21) local time, the latest quarterly report released by the World Platinum Investment Council (WPIC) showed that as industrial demand for platinum will rise to a record high, the agency expects a record gap in supply and demand for this precious metal. WPIC predicts that total demand in the global platinum market will increase by 26% year-on-year to 8.15 million ounces in 2023, but supply will decrease by 3% to 7.079 million ounces. This means that there will be a gap of 1.071 million ounces between supply and demand, which is expected to become the largest gap since the agency has tracked this data.
Platinum has experienced an obvious oversupply in the past two years. In 2022, supply exceeded demand by 800,000 ounces, and in 2021, the figure was 1.294 million ounces. WPIC expects the supply gap to narrow significantly in 2024 to 353,000 ounces.
WPIC research director Edward Sterck told the media that platinum mining and recycling have been restricted this year, but the market is still largely driven by demand. He added that investment demand has also turned positive following net divestments in 2021 and 2022.
Specifically, on the demand side, the expansion of production capacity in the glass industry and chemical industry has promoted the growth of platinum industrial demand, offsetting the decline in demand in the electrical and oil markets. WPIC expects platinum demand for automobiles to climb 14% this year to a six-year high of 2.367 million ounces.
Sterck said that while demand will fall back in 2024, it is still likely to be the third strongest year on record. But even with such a huge supply and demand deficit, the main price of platinum futures has still fallen by nearly 14% this year, now trading at $936.40 per ounce.
WPIC attributed this year's low platinum prices to the "global macroeconomic environment", which has seen central banks' efforts to curb inflation lead to significant increases in interest rates. Sterck said that in a higher interest rate environment, investors prefer to hold assets that can generate income rather than precious metals that cannot generate income.
In addition, Sterck also believes that car manufacturers may have accumulated higher platinum inventories in 2021 and 2022, but due to factors such as the new crown epidemic and semiconductor shortages, car production has not met previous expectations.
However, WPIC believes that the platinum inventories of car companies have been more or less exhausted, and this underlying market fundamental may be reflected in future prices.